Hybrid model Ulmart successful: sales grow by 31%
It looks Ulmart has found the ideal model for operating an ecommerce business in Russia. The 31% growth of sales for the first six months of 2014 in a year-on-year comparison are proof of that. Sequential quarterly growth even increased by 47%. Ulmart showed to be a disruptive player in the Russian ecommerce with its ‘web of fullfilment’.
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Russia is a difficult country for ecommerce players. And that’s mostly due to the infrastructure which is far from perfect. Ecommerce is all about fast and seamless delivery and that’s precisely something most Russian online stores aren’t able to offer properly.
So last-mile delivery isn’t really a profit-creating option, which lead to Ulmart, Russia’s leading online retailer, taking a different approach. It allows customers access to its fulfillment centers (of which there are 29 in the European part of the country) and this hasn’t done the ecommerce company any harm. Russia is a different market. Why should force consumers to request home delivery if culturally it is not really a sought after service”, says Brian Kean, Ulmart’s Director for Communications and Investor Relations.
Last-mile delivery, pick-up points and fulfillment centers
The way Ulmart operates its logistics has three main elements: there’s last-mile delivery (roughly 15%), pre-last mile or what the online retailer refers to as pick-up points (currently there are 412 situated throughout the European part of Russia and around 22% of the orders are picked up there) and then there’s the company’s 29 urban-based fulfillment centers, of which 63% of all sales are picked up at.
But these are not the only reasons Ulmart is doing well in Russia, it’s also because of the expansion into faster-growing product categories like auto parts, children’s clothes & toys and home design items. The formerly leading category of consumer electronics, which is low-margined, dropped by 5% to 46% of overall sales, while the electronic catalogue has increased from 55,000 to 75,000 SKU.
‘Ecommerce is really about logistics’
Anothing that’s positive news for Ulmart is that St. Petersburg and North-West Russia are no longer the big drivers of its ecommerce sales. The company’s 2013 expansion into the regions has paid off with growth of 76% in a year-on-year comparison, they now make up 42% of company sales, while St. Petersburg and North-West Russia account for 36%. Moscow still makes up 21% (up 12%). “Success in e-commerce is not solely about ground-shaking technological breakthroughs. It is really about logistics: getting the right product at the right price to the right customer when and where he wants it. This is what Ulmart excels at”, believes Ulmart’s CMO Alexandra Savina.